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• W2597462303 abstract "CASE DESCRIPTION This case study compared the accounting behind the impairment of long-lived assets between US GAAP and IFRS. The case is appropriate for either senior level or graduate accounting students. The case is designed to be taught in one class hour and is expected to require five to ten hours outside of class. CASE SYNOPSIS This case study provides accounting students an opportunity to explore a real life example of how accounting estimates and choice of reporting standards impact financial statements. Students will analyze the differences between US GAAP and IFRS for the impairment of long-lived assets. In addition, they will be required to create an estimate of the impairment calculation for nine capesize vessels purchased by Genco Shipping & Trading at the top of the boom market in 2007. The calculation will expose students to the significant amounts of ambiguity often found in accounting estimates. The range of reasonable answers could vary from an impairment of long-lived assets of over $600 million to no impairment at all. These wide ranges of estimates can provide an enlightened discussion of the use of estimates in accounting. Professional judgment will be tested as students wrestle with how answers vary considerably based on the accounting framework chosen. Keywords: Asset Impairment, US GAAP, IFRS. INTRODUCTION Genco Shipping & Trading is a public company and trades on the New York Stock Exchange under the ticker symbol GNK. In 2014 Genco went through a prepackaged bankruptcy where debt holders received the majority of the new equity in the company. The prior equity holders received stock warrants for a total of six percent of the equity of the new company. As a US public company, GNK files its financial statements with the Securities and Exchange Commission (SEC) using US Generally Accepted Accounting Principles (US GAAP). They are a transporter of dry bulk materials, including iron ore, coal, grain, and many other raw materials on large vessels among international shipping routes. Genco Shipping & Trading went public with 17 vessels and has expanded operations through the acquisition of additional vessels to bring the total number of ships up to 53 as of December 31, 2012. Although acquiring assets over time, Genco's largest acquisition of vessels occurred in June of 2007 when they purchased 9 capesize vessels for approximately $1.1 billion. These vessels were delivered to Genco between the third quarter of 2007 and the first quarter of 2010 when the last vessel was built. The dry bulk shipping industry has experienced a significant boom and bust cycle over the last decade. The Baltic Dry Index (BDI), a shipping and trade index for 4 classes of ships (capesize, panamax, supramax, and handysize), measures the daily average rental rate to ship raw materials across a variety of international shipping routes. The higher the BDI, the more a company can rent its vessels for. As seen in figure 1, the BDI has fluctuated from over 11,000 to below 1,000 since GNK went public. The daily rental rate for capesize dry bulk vessels has ranged from over $150,000 per day to under $5,000 per day. (RS Platou, 2013). Following the leasing rates, the fair market value of all classes of ships has varied significantly over the last decade, with the capesize asset prices ranging from $150 million in early 2008 to under $40 million in 2011. (RS Platou, 2013/ The Securities and Exchange Commission has raised questions about the estimates used by the company for the impairment of long lived assets. Item 6 in the SEC comment letter to Genco dated March 16, 2011 addressed this concern and is listed below, the entire letter can be found at the SEC website at http://www.sec.gov/Archives/edgar/data/1326200/000000000011016598/filename1.pdf Impairment of long-lived assets, page 67 6. In the fifth paragraph of this section, you state that assumptions used to develop estimates of future undiscounted cash flows are based on historical trends. …" @default.
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• W2597462303 date "2016-01-01" @default.
• W2597462303 modified "2023-09-28" @default.
• W2597462303 title "Impairment Analysis: Comparison of Impairment of Long-Lived Assets between US GAAP and IFRS" @default.
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